Can investor coalitions drive corporate climate action?

In recent years, numerous investor-led initiatives have formed to drive sustainability and climate action across the real economy. To date, their effectiveness remains largely untested. This paper addresses this gap by evaluating the impact of Climate Action 100+ (CA100+), the world’s largest investor coalition focused on climate change. To overcome common measurement challenges, the study employs a multidimensional approach to assessing corporate climate action, including newly collected data on the ambition of carbon emission reduction targets and a Natural Language Processing model to assess climate-related disclosures.

The study tries to isolate the impact of CA100+ by examining the coalition’s selection process for its focus companies and comparing targeted companies with a control group. The findings indicate that CA100+ has not significantly influenced climate-related disclosures or immediate reductions in carbon intensity. However, its engagement has led to greater ambition in companies’ medium- and long-term emission reduction targets. Notably, this effect is concentrated among companies selected by investors on a discretionary basis.

Key points for decision-makers

• Climate Action 100+ (CA100+) represents a coalition of more than 600 investors, targeting 168 high-emitting companies to align their corporate actions with the goals of the Paris Agreement.
• This study evaluates whether observed changes in climate action among the targeted companies result from CA100+’s engagement or reflect broader market trends.
• Corporate climate action is assessed using a dataset from the Transition Pathway Initiative on emissions reduction targets, augmented with new primary data, along with analysis of corporate disclosures using the ClimateBERT model.
• While CA100+ has not substantially influenced climate-related reporting or near-term emissions reductions, its collective engagement has strengthened the ambition of medium- and long-term emission reduction targets.
• Notably, the effect on targets is concentrated among the ‘Plus’ companies, which were added to CA100+’s focus list on a discretionary basis. This suggests that investor selectivity may matter for engagement outcomes.
• The results also indicate that investors should focus more on near-term milestones, as a lack of short-term targets could lead to ‘backloading’ decarbonisation efforts, where companies commit to future reductions without immediate action.
• The study evaluates the first phase of CA100+ engagement (2017–2023) which focused on climate-related disclosure and target-setting. Reducing companies’ carbon intensities – a newer objective that CA100+ introduced in its ongoing second phase of engagement – may require more time to materialise.
• CA100+ may have broader ‘spillover’ effects, such as establishing norms for climate action across the corporate landscape, potentially encouraging improvements even among companies not directly targeted. This study focuses on measuring CA100+’s direct impact through collective engagement on its focus companies rather than its potential influence on the broader ecosystem in which companies operate.

This paper was previously published in October 2024 by the LSE Department of Geography and Environment in its ‘Papers in Environmental Economics and Policy’ series (Paper no. 49).